Check Your Credit Report

What's Your Score?

300-850

Credit card companies and lenders rely on credit scores, which determine someone's chances to borrow money - and how favorable the terms will be. Scores range from 200 to above 800. Scores below 620 are considered risky; 720 and over are excellent.

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There are five categories of scoring: payment history (35%); amount owed (30%); length of credit history (15%); new credit (10%); and types of credit (10%). Lenders receive your score and "reason codes," which are the keys to improving your score.

Check your own score yearly by ordering reports from the three major credit scoring companies: Equifax (www.equifax.com), Experian (www.experian.com), and TransUnion (www.tuc.com). Or try a site like Quizzle (www.quizzle.com)

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Notify the credit bureau of inaccuracies, along with copies of documents that dispute incorrect entries. Close accounts not in use. Request that late payments older than seven years be removed. Verify and update accounts and account numbers. Verify your address and Social Security number.

 

To improve your score:

Pay your bills on time. Reduce outstanding debt. Build up your savings. Don't fall for illegal schemes that help create a new credit identity.

Borrowing From Your 401k

Have you refinanced your home into oblivion? Tapped out every available money resource with a myriad of loans and credit cards? There is one last option: borrowing from your 401(k).

If you've never heard of this option, it's because until recently, it just wasn't done that frequently. But with the market still not fully recovered, and people desiring to cut their high interest debt, more folks are discovering this alternative lending source.

Pros:

• A 401(k) loan does not appear on your credit report. They are not reported to Experian, and do not become a part of your credit history.
• The interest on these loans is some of the lowest out there.
• You're paying yourself the interest, not some bank.
• You'll get your money more quickly than if you were using another means of borrowing.
• Since it's a loan, you will not be charged the 10 percent early withdrawal penalties plus income taxes you would have to pay if you withdrew the money.
• You don't have to qualify for the loan through the usual long, painful credit approval process, because in effect, you are the lender.
• No assets or collateral are needed to secure the loan.

...Since it's a loan, you will not be charged

the 10 percent early withdrawal penalties

plus income taxes.

Cons:

• The biggest con is that you are forfeiting the accrued interest you would earn if your money stayed in the 401(k). Calculated over the long term, it can cost tens (even hundreds) of thousands of dollars in potential gain.
• Unlike a home equity loan, the interest is not tax deductible.
• Some plans do not allow contributions to the 401(k) for the period of the loan.
• If you lose or quit your job, the loan is often due in full in 30-60 days (although some plans are open to renegotiating the terms of the loan. Find out before you sign the papers.)
  
  If you default on the loan, it is considered a withdrawal and you will owe a 10 percent penalty plus a hefty tax payment. So if you had borrowed $50,000 and couldn't pay it back, you would have to pay a $5,000penalty and federal and state taxes that could take another $20,000 of the amount.

To calculate the actual cost of borrowing from either source: for a home equity loan, ignoring up-front costs, the after-tax cost is the interest rate minus your tax savings (interest rate times 1 minus your tax rate).

An Energy Efficient Home Is a Happy One

Did you know that making your home energy efficient increases its value?

According to one study, making no cost/low cost changes can boost your home's value $18,000. Why not implement some of the following suggestions to make your home more energy efficient?

1. Lower the thermostat on your water heater.

If your hot tap water is too hot to touch, lower the temperature a few degrees.

2. Check for air leaking around doors.

A lot of the air you pay to heat or cool escapes through unsealed doors. Install or replace worn weather stripping. Replace broken or missing storm doors.

3. Close the air vents in rooms not in use.

For example, close the vents and shut the door to an unused guest room.

4. Keep heat producers far from your thermostat in summer.

Floor lamps and televisions can significantly raise the temperature in the area near a thermostat, turning on your air conditioner too often.

5. Clean your furnace and air conditioner filters.

Replace existing dirty air conditioner or furnace filters. During heavy use periods, replacement is recommended every 30 days.

6. Operate large appliances during low-use periods in summer.

Use your washer and dryer and other heat-producers early in the morning or late at night. Use the air-dry method on your dishwasher to save energy.

7. Request an energy audit.

Contact your local utility company to request a free energy audit. Most electric and gas companies will check for proper insulation, find cracks in the eaves or roof that could leak energy, and make recommendations for improvements. Some electric companies offer low-cost financing for such improvements.

8. Replace existing insulation.

A proper barrier keeps heat and cold from penetrating your home's exterior and provides for even temperatures between rooms. The EPA recently reported that proper ceiling insulation may reduce electric bills 20%.

9. Replace existing appliances.

If money is no object, replace old appliances with Energy Star appliances, specifically created to optimize energy consumption. If your budget limits you to replacing one appliance, buy a new refrigerator; a new model could knock off 25% of your electric bill.

10. Buy new light bulbs.

Replace incandescent bulbs with fluorescent.

11. Contact the U.S. Department of Housing and Urban Development regarding EEM Mortgages. EEMs provide benefits to borrowers purchasing a home that is energy efficient, or can be made efficient with improvements.